The End of the American Era

Old Glory at SunsetPerhaps one of the funniest yet most obscure Monty Python sketches portrayed a meeting of senior British Civil Servants. John Cleese entered and spouted off a great deal of bureaucratic gibberish, which was then translated by his colleagues into a simple problem: the government needed something new to tax. Terry Jones then said, “…most things we do for pleasure are taxed…smoking is taxed, and drinking is taxed, but not thingy.” At first, the others looked nonplussed. “Poo poos?” Graham Chapman asked. “No,” Jones re-emphasised, “thingy.” The penny drops, and Eric Idle then states the punchline, “Oh thingy….well that would certainly make chartered accountancy a much more interesting job.”

When I saw it, I howled with laughter at the absolute madness of the idea. Taxing thingy indeed. How would you do it, put a monitor in every bedroom in the land? Who would have the gall to collect it? What would the forms be like? How on earth would an audit be performed? “I see, Mr. Smith, that you claim to have had sex with your wife forty times in the past fiscal year, but as she’s a hottie, we believe you did it fifty-five.”

As crazy as it sounds, this week’s Economist highlighted a similar absurdity in it’s analysis of Rhode Island’s present situation. It stated that in 1971, there was a proposal for taxing thingy, at a rate of $2 per time. Only men would be charged. Presumably this peculiar idea was mentioned as an attempt at humour, and also to emphasise the fact that Rhode Island has few means of generating extra revenue in light of the devastating effects of the present recession. However, the fact that such jokes are effective is a worrying sign.

When Monty Python’s sketch first aired, Britain’s finances were in a terrible state: the so-called “Dash for Growth” under Edward Heath had failed, and the nation was constantly reeling due to labour disputes. Eventually, the government had to go to the International Monetary Fund for assistance. Britain was a more highly taxed country at that time as well: the voice of complaint in response can clearly be heard in the Beatles’ song “Taxman”: “Now I say how it will be / there’s one for you, nineteen for me”. The thingy joke had teeth, not just comedic excellence.

The Economist’s jape also has bite; it hints at a state on the edge, in a country that is on the precipice. It highlights, albeit unconsciously, a wider issue that the United States and the wider world is going to have to come to grips with in following years: America is just not as wealthy as it was, and it can no longer afford to be what it was. For all intents and purposes, the so-called age of “Pax Americana” is drawing to a close.

The reasons for this decline are both technical and ethical. First, the United States is no longer a creditor nation and hasn’t been for some time. According to a January article in the New York Times, China owns over $1 trillion in American debt, and recently surpassed Japan in its ownership of Treasuries. The pace of this debt accumulation, which stopped under Clinton but accelerated thanks to Bush, is increasing. Last Christmas, I happened to walk down the street on which the infamous “Debt Clock” resides. By the time I had walked three blocks, a further $2 million dollars in debt had been added. As I write this, the debt has burst through the $11.2 trillion ceiling.

If this money had been spent in ways to make the American economy cleaner and more efficient, then we could conceivably see a return on the investment and the potential to pay it back. However, a great deal of it has been spent on useless military adventurism, which chipped away at the ethical edifice of American power. Let us be clear, the only reason why Britain and America went to war in Iraq was because President Bush wanted to do so. All other justifications came from facts which where hastily assembled around this particular desire. What Bush did not reckon on is what Colin Powell apparently advised him prior to the conflict, “You break it, you bought it”. Billions have been spent after the war trying to find some means of holding Iraq together (though it was an artificial construct to begin with) and to make their economy function again. The war thus weakened America in both economic and moral authority; we should be amazed that creditor nations like China didn’t simply pull the plug. It may be only because they needed to keep their currency’s value down in relation to the dollar (and thus bolster exports) that they continued to make these purchases.

Recklessness went hand in hand with neglect, namely, the financial industry was allowed to run riot. The titans of Wall Street believed they were protected from failure either because of personal hubris, or due to connections with Washington (after all, bailouts had happened before). A lengthy period of economic growth, bolstered by low interest rates, led to a “party hardy” psychology which few in power did anything to puncture. It largely had to burst due its own lack of internal logic: the “Greater Fool” theory which drives Wall Street altered slightly – the “greater fool” was not the person buying or selling, it was both the buyer and the seller.

President Obama has been left with a shabby state of affairs; furthermore, he is confronted with one of the greatest predicaments of his office: specifically, he only has a limited timeframe in which to achieve his agenda before he has to get involved in electioneering again. Those who criticise his present “hyperactivity” would do well to keep in mind that he has an effective eighteen months after wearing the Oath of Office before he has to start working on keeping the Democrats in power. Therefore, if he wants to fix the economy, change health care, and re-regulate the finance industry, he has no choice but to adhere to a punishing schedule; that said, as I have previously stated, he should repackage what he’s doing so it is more easily understood.

However, even if President Obama is successful, there is a limit to what one man can do. The most optimistic scenarios still suggest that America will be in hock for quite a long time, and there is an assumption that somehow, at least someone will continue buy this debt. However, as President Obama well knows, and his predecessor President Clinton understood, debt is straightjacket on any freedom of action to do other things: interest payments take away from being able to spend money on the poor, or creating new green industries, or providing better pensions or health care. Rather, it creates a deadly spiral, in which power transfers to those whom the money is owed (provided, unlike Japan, they are not in a state of collapse themselves).

The remedies in this situation also imply a crash in American power: the obvious choice for cuts is defence; however, this would require abandoning any “world policeman” role, potentially including any rescue of Darfur. When the choices all lead to a similar conclusion, fate becomes unavoidable: America’s relative stature is going to decline.

There are some who would welcome this change. I’m not sure dancing for joy is the proper response: for all the faults that America may have, at the very least, the government is elected, and while its application of its principles is irregular to say the least, at least these values exist and are codified. The Tibetians probably wish the Chinese had such scruples.

Furthermore, American decline is manna from heaven for demagogues of authoritarian intent. It was possible throughout much of the twentieth century to point at America as an example of what liberty and the rights of man could achieve; it was an elegant counterpoint to dictators in Berlin, Rome and Moscow. If the American model loses too much strength, then it could become an example of what liberty and the rights of man failed to do. There are other examples of representative government, of course, but “the Canadian Dream” doesn’t get as much press as its southern counterpart.

Decline, however, need not be a fall. It was always likely that more populous parts of the world like China and India, and nations that are tapping new-found potential like Brazil, would eventually see their status rise, while America’s had nowhere else to go but down. The change can be ameliorated if policy makers and people alike realise their greatness is going to have to be defined along a different scale. It may no longer be possible to project military power into every corner of the globe, but it is certainly possible that America can lead the way in defending the rights of its citizens. It may not be feasible for America to be the biggest manufacturer, but the country can lead the way in information technology, health care, and green energy. America may not be top-dog in finance and banking forever, but after the present crisis, who really wants that particular responsibility?

In short, it is possible for a great, lovely country to be rebuilt, provided the model changes, provided that debts are paid, and that the urge to hubris does not win out over old-fashioned Yankee pragmatism. Things are desperate to the point of talk of taxing thingy now, but the future is yet to be defined: the decisions made now will point the way.

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